x |
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended
December 31, 2005
|
|
o |
TRANSITION
REPORT PURSUANT TO SECTION 13
OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from
___________ to ___________
|
Nevada
|
333-111656
|
98-0479924
|
(State
or other jurisdiction of
|
(Commission
File Number)
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
|
300,
611-10TH
AVENUE S.W. FLOOR, 610-8TH AVENUE S.W.
|
(403)
265-3221
|
T2R
0B2
|
CALGARY,
ALBERTA
|
(Telephone
Number)
|
(Zip
Code)
|
CANADA
|
||
(Address
of principal executive offices)
|
Page
|
||
PART
I
|
||
ITEM
1.
|
DESCRIPTION
OF BUSINESS.
|
1
|
ITEM
2.
|
DESCRIPTION
OF PROPERTY.
|
8
|
ITEM
3.
|
LEGAL
PROCEEDINGS.
|
11
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|
11
|
PART
II
|
12
|
|
ITEM
5.
|
MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER
PURCHASES OF EQUITY SECURITIES.
|
12
|
ITEM
6.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS.
|
14
|
ITEM
7.
|
FINANCIAL
STATEMENTS.
|
20 |
ITEM
8.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
|
52
|
ITEM
8A.
|
CONTROLS
AND PROCEDURES.
|
52
|
ITEM
8B.
|
OTHER
INFORMATION.
|
53
|
PART
III
|
53
|
|
ITEM
9.
|
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION
16(A) OF THE EXCHANGE ACT.
|
53
|
ITEM
10.
|
EXECUTIVE
COMPENSATION.
|
57
|
ITEM
11.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
|
62
|
ITEM
12.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.
|
64
|
ITEM
13.
|
EXHIBITS.
|
65
|
ITEM
14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES.
|
69
|
§
|
Oil
and gas reserves tend to be distributed in a pyramid
pattern.
The distribution of oil and gas reserves is generally depicted as
a
“pyramid” with the greatest number of fields being smaller fields and with
very few large fields. Because of their size, the large fields are
more
easily located - most have already been discovered and tend to be,
though
are not always, the most economical to produce.
|
§
|
Oil
and gas companies tend to be distributed in a pyramid
pattern.
Oil and gas companies tend to be distributed in a pattern that is
similar
to that of oil and gas reserves. There are many small companies and
few
very large companies. Large companies tend to operate at the top
of the
resource pyramid, where rewards are larger but fewer. Smaller companies
tend to operate at the base of the resource pyramid, where rewards
are
smaller but plentiful. Furthermore, large companies tend to divest
smaller, non-core assets as they grow, and tend to acquire smaller
companies that have reached a critical mass, perpetuating a cycle
of
growth.
|
§
|
In
a mature producing area with a mature industry, the entirety of the
resource pyramid is being explored and developed by both small and
large
oil and gas companies.
Maturity is typically a function of time and market forces. Government
policy can have an important role, encouraging or discouraging the
full
potential of the resource base and industry.
|
§
|
By
its nature, finding and producing oil and gas is a risky
business.
Oil and gas deposits may be located miles below the earth’s surface. There
is no guarantee, despite the sophistication of modern exploration
techniques, that oil or gas will be present in a particular location
without drilling. Additionally, there is no guarantee that a discovery
will be commercially viable without follow up drilling, nor can there
be
any guarantee that such follow up drilling will be successful. There
is
also no guarantee that reserves once established will produce at
expected
rates. Furthermore, adverse political events and changing laws/regulations
can threaten the economic viability of oil and gas activity, the
safety
and security of workers, or the reputation of a company that conducts
business outside of more stable countries. The effective management
of
risk is integral to the oil and gas
industry.
|
§
|
The
oil and gas industry is capital intensive.
Investment decisions are based on long time horizons - the typical
oil and
gas project has a life of greater than 20 years. Economics and value
are
based on a long-term perspective.
|
§
|
The
production profile for a substantial majority of oil and gas reservoirs
is
a declining trend.
Production from an oil or gas field with a fixed number of wells
declines
over time. That decline rate varies depending on the reservoir and
well/development characteristics but in general, steepest declines
are
earlier in the production life of the field. Typically, production
falls
to a point where revenues are insufficient to cover operating costs
(the
project reaches its economic limit) and the field is
abandoned.
|
§
|
Production
levels in a field can be maintained by more intensive drilling and/or
enhancement of existing wells and such efforts are usually made to
offset
the natural decline in production.
A
low price environment, budgetary constraints or lack of imagination
can
prevent companies from taking appropriate action to offset a natural
decline in production, however, this can present a significant opportunity
for new operators in a high price environment. While
production levels may be maintained for a period of time by more
intensive
drilling, such efforts can only be maintained for short periods of
time
and may not be effective. Moreover, such efforts may also be economically
unfeasible and may be impermissible under rules and regulations applying
to the field.
|
§
|
Position
in countries that are welcoming to foreign investment, that provide
attractive fiscal terms and/or offer opportunities that have been
previously ignored or undervalued;
|
§
|
Engage
qualified, experienced and motivated professionals;
|
§
|
Establish
an effective local presence;
|
§
|
Create
alliances with companies that are active in areas and countries of
interest, and consolidate initial land/property positions;
|
§
|
Build
a balanced portfolio of production, development, step-out and more
speculative exploration opportunities;
|
§
|
Assess
and close opportunities expeditiously;
|
§
|
Do
business in familiar countries with familiar people and familiar
assets.
|
§
|
Palmar
Largo Joint Venture - Gran Tierra participation 14%, Pluspetrol (Operator)
38.15%, Repsol YPF 30%, Compañía General de Combustibles (“CGC”)
17.85%.
|
§
|
Nacatimbay
Concession - Gran Tierra participation 50%, CGC (Operator)
50%.
|
§
|
Ipaguazu
Concession - Gran Tierra participation 50%, CGC (Operator)
50%.
|
Estimated
Reserves (1)
Net
to Gran Tierra, After 12% Royalty, at December 31,
2005
|
|||
Oil
(thousand
barrels)
|
Natural
Gas
(million
cubic feet)
|
Liquids
(thousand
barrels)
|
|
Palmar
Largo
|
Nacatimbay
|
Nacatimbay
|
|
Proved
Developed
|
462
|
24.5
|
1.72
|
Proved
Undeveloped
|
119
|
-
|
-
|
Total
Proved
|
581
|
24.5
|
1.72
|
(1)
|
Reserves
certified by Gaffney, Cline and Associates, as of February
2006.
|
Production
Net
to Gran Tierra, After 12% Royalty, September 1 - December 31,
2005
|
Oil
- Palmar
Largo
|
Natural
Gas -
Nacatimbay
|
Liquids
Nacatimbay
|
||
(barrels
per day)
|
(average
price)
|
(thousand
cubic feet per day)
|
(average
price)
|
(barrels
per day)
|
293
|
$37.80/barrel
|
494
|
$1.50/thousand
cubic feet
|
5
|
Productive
Wells
Productive
Wells
Gran
Tierra, December 31, 2005
|
|||||||||||||||||||
(Number of wells) |
Oil
|
Natural
Gas
|
Total
|
||||||||||||||||
Gross
(1)
|
Net
(2)
|
Gross
(1)
|
Net
(2)
|
Gross
(1)
|
Net
(2)
|
||||||||||||||
Palmar
Largo
|
16
|
2.2
|
-
|
-
|
16
|
2.2
|
|||||||||||||
Nacatimbay
|
-
|
-
|
1
|
0.5
|
1
|
0.5
|
|||||||||||||
Ipaguazu
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Total
|
16
|
2.2
|
1
|
0.5
|
17
|
2.7
|
(1)
|
Represents
the total number of wells at each
property.
|
(2)
|
Represents
our interest in the total number of wells at each
property.
|
Acreage
Acreage
Gran
Tierra, December 31, 2005
|
|||||||||||||||||||
(Acres) |
Developed
|
Undeveloped
|
Total
|
||||||||||||||||
Gross
(1)
|
Net
(2)
|
Gross
(1)
|
Net
(2)
|
Gross
(1)
|
Net
(2)
|
||||||||||||||
Palmar
Largo
|
301,700
|
42,238
|
-
|
-
|
301,700
|
42,238
|
|||||||||||||
Nacatimbay
|
36,600
|
18,300
|
-
|
-
|
36,600
|
18,300
|
|||||||||||||
Ipaguazu
|
43,200
|
21,600
|
-
|
-
|
43,200
|
21,600
|
|||||||||||||
Total
|
381,500
|
82,138
|
-
|
-
|
381,500
|
82,138
|
(1)
|
Represents
the total acreage at each property.
|
(2)
|
Represents
our interest in the total acreage at each
property.
|
Drilling
Activity
Drilling
Activity
Gran
Tierra, 2005
|
|||||||||||||||||||
(Number of wells) |
Productive
|
Dry
|
Total
|
||||||||||||||||
Gross
(1)
|
Net
(2)
|
Gross
(1)
|
Net
(2)
|
Gross
(1)
|
Net
(2)
|
||||||||||||||
Exploration
|
-
|
-
|
1
|
0.14
|
1
|
0.14
|
|||||||||||||
Development
|
1
|
0.14
|
-
|
-
|
1
|
0.14
|
|||||||||||||
Total
|
1
|
0.14
|
1
|
0.14
|
2
|
0.28
|
(1)
|
Represents
the total number of wells at which there is drilling
activity.
|
(2)
|
Represents
our interest in the total number of wells at which there is drilling
activity.
|
Title
|
Number
of security holders
|
Common
Stock
|
Approximately
127 holders of record
|
Exchangeable
Shares
|
Approximately
45
|
Plan
category
|
Number
of securities to be issued
upon exercise of outstanding options, warrants and rights |
Weighted-average
exercise price
of outstanding options, warrants and rights |
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
(a)
|
(b)
|
(c)
|
|
Equity
compensation plans approved by security holders
|
1,940,000
|
$1.12
|
60,000
|
Equity
compensation plans not approved by security
holders
|
--
|
--
|
--
|
Total
|
1,940,000
|
--
|
60,000
|
§
|
expected
reservoir characteristics based on geological, geophysical and engineering
assessments;
|
§
|
future
production rates based on historical performance and expected future
operating and investment
activities;
|
§
|
quality
differentials;
|
§
|
assumed
effects of regulation by governmental agencies;
and
|
§
|
future
development and operating costs.
|
§
|
Determining
whether or not an exploratory well has found economically producible
reserves.
|
§
|
Calculating
our unit-of-production depletion rates. Both proved and proved developed
reserves estimates are used to determine rates that are applied to
each
unit-of-production in calculating our depletion expense. Proved reserves
are used where a property is acquired and proved developed reserves
are
used where a property is drilled and
developed.
|
§
|
Assessing,
when necessary, our oil and gas assets for impairment. Estimated
future
cash flows are determined using proved reserves. The critical estimates
used to assess impairment, including the impact of changes in reserves
estimates, are discussed below.
|
§
|
abnormal
amounts of idle facility expense, freight, handling costs and wasted
material (spoilage) should be recognized as current-period charges;
and
|
§
|
the
allocation of fixed production overhead to inventory based on the
normal
capacity of the production facilities is
required.
|
Page(s)
|
|
Consolidated
Financial Statements for the fiscal year ended December 31,
2005:
|
|
Report
of Independent Registered Chartered Accountants
|
21
|
Comments
by Independent Registered Chartered Accountants on Canada-United
States of
America Reporting Differences
|
21
|
Consolidated
Statement of Operations and Deficit
|
22
|
Consolidated
Balance Sheet
|
23
|
Consolidated
Statement of Cash Flows
|
24
|
Consolidated
Statement of Shareholders’
Equity
|
25
|
Notes
to the Consolidated Financial Statements
|
26-38
|
Supplementary
Data (unaudited)
|
39-41
|
Pro Forma Financial Statements for the fiscal year ended December 31, 2005: |
42
|
Pro
Forma Consolidated Statement of Operations
|
43
|
Notes
to Pro Forma Consolidated Financial Statements
|
44
|
Schedule
of Revenues, Royalties and Operating Cost Corresponding to the
14%
interest in the
Palmar Largo joint venture for the eight-month period ending August 31, 2005: |
45
|
Report
of Independent Registered Public Accounting Firm
|
45
|
Schedule
of Revenues, Royalties and Operating Cost
|
46
|
Notes
to the Schedule of Revenues, Royalties and Operating
Cost
|
47-48
|
Schedule
of Revenues, Royalties and Operating Cost corresponding to the 14%
interest in the Palmar Largo
joint venture for the years ended December 31, 2004 and 2003 and for the six months ended June 30, 2005 and 2004: |
49
|
Notes
to the Schedule of Revenues, Royalties and Operating
Cost
|
50-51
|
Calgary, Alberta, Canada | /s/ Deloitte & Touche LLP | ||
March 3, 2006 | Independent Registered Chartered Accountants | ||
Calgary, Alberta, Canada |
/s/
Deloitte & Touche
LLP
|
March 3, 2006 |
Independent
Registered Chartered
Accountants
|
GRAN
TIERRA ENERGY INC.
Consolidated
Statement of Operations
Period
from Incorporation on January 26, 2005 to December 31,
2005
(Stated
in US dollars)
|
$
|
||||
REVENUES
|
1,059,297
|
|||
EXPENSES
|
||||
Operating
|
395,287
|
|||
General
and administrative
|
2,482,070
|
|||
Depletion,
depreciation and accretion
|
462,119
|
|||
Foreign
exchange gain
|
(31,271
|
)
|
||
3,308,205
|
||||
LOSS
BEFORE INCOME TAXES
|
(2,248,908
|
)
|
||
INCOME
TAXES
|
29,228
|
|||
NET
LOSS
|
(2,219,680
|
)
|
||
BASIC
AND DILUTED NET LOSS PER SHARE
|
(0.16
|
)
|
||
WEIGHTED
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - BASIC AND DILUTED
|
13,538,149
|
GRAN
TIERRA ENERGY INC.
Consolidated
Balance Sheet
December
31, 2005
(Stated
in US dollars)
|
||||
$
|
||||
ASSETS
|
||||
CURRENT
|
||||
Cash
|
2,221,456
|
|||
Restricted
cash
|
400,427
|
|||
Accounts
receivable
|
808,960
|
|||
Prepaid
expenses and deposits
|
42,701
|
|||
Inventory
|
447,012
|
|||
3,920,556
|
||||
Taxes
receivable
|
108,139
|
|||
Capital
assets (Note 3)
|
8,313,208
|
|||
Deferred
income taxes (Note 6)
|
29,228
|
|||
12,371,131
|
||||
LIABILITIES
|
||||
CURRENT
|
||||
Accounts
payable
|
1,142,930
|
|||
Accrued
liabilities
|
121,122
|
|||
1,264,052
|
||||
Asset
retirement obligations (Note 5)
|
67,732
|
|||
SHAREHOLDERS’
EQUITY
|
||||
Share
capital (Note 4)
(24,554,953
common shares and 18,730,159 exchangeable shares, par value $0.001
per
share, issued and outstanding)
|
43,285
|
|||
Additional
paid-in-capital
|
11,807,313
|
|||
Warrants
|
1,408,429
|
|||
Deficit
|
(2,219,680
|
)
|
||
11,039,347
|
||||
12,371,131
|
||||
GRAN
TIERRA ENERGY INC.
Consolidated
Statement of Cash Flows
Period
from Incorporation on January 26, 2005 to December 31,
2005
(Stated
in US dollars)
|
||||
$
|
||||
CASH
FLOWS RELATED TO THE FOLLOWING
ACTIVITIES:
|
||||
OPERATING
|
||||
Net
loss
|
(2,219,680
|
)
|
||
Add
(deduct) items not involving cash:
|
||||
Depletion,
depreciation and accretion
|
462,119
|
|||
Deferred
income taxes
|
(29,228
|
)
|
||
Stock-based
compensation
|
52,911
|
|||
Tax
receivable
|
(108,139
|
)
|
||
Changes
in non-cash working capital (Note 7)
|
|
|
||
Increase
in accounts receivable
|
(808,960 | ) | ||
Increase
in prepaid expenses
|
(42,701 | ) | ||
Increase
in inventory
|
(447,012 | ) | ||
Increase
in accounts payable
|
1,142,930 | |||
Increase
in accrued liabilities
|
121,122 | |||
(1,876,638
|
)
|
|||
FINANCING
|
||||
Proceeds
from issuance of common shares and warrants, net of issuance
costs
|
13,206,116
|
|||
INVESTING
|
||||
Purchase
of capital assets
|
(8,707,595
|
)
|
||
Restricted
cash
|
(400,427
|
)
|
||
(9,108,022
|
)
|
|||
NET
INCREASE IN CASH
|
2,221,456
|
|||
CASH,
BEGINNING OF PERIOD
|
-
|
|||
CASH,
END OF PERIOD
|
2,221,456
|
|||
Supplemental
cash flow disclosures:
|
||||
Cash
paid for interest
|
-
|
|||
Cash
paid for taxes
|
-
|
GRAN
TIERRA ENERGY INC.
Consolidated
Statement of Shareholders’ Equity
Period
from Incorporation on January 26, 2005 to December 31,
2005
(Stated
in US dollars)
|
||||
$
|
||||
Share
Capital
|
||||
Balance
beginning of period
|
-
|
|||
Issue
of common shares
|
43,285
|
|||
Balance
end of period
|
43,285
|
|||
Additional
paid-in-capital
|
||||
Balance
beginning of period
|
-
|
|||
Issue
of common shares
|
11,754,402
|
|||
Stock-based
compensation expense
|
52,911
|
|||
Balance
end of period
|
11,807,313
|
|||
Warrants
|
||||
Balance
beginning of period
|
-
|
|||
Issue
of warrants
|
1,408,429
|
|||
Balance
end of period
|
1,408,429
|
|||
Deficit
|
||||
Balance
beginning of period
|
-
|
|||
Net
loss
|
(2,219,680
|
)
|
||
Balance
end of period
|
(2,219,680
|
)
|
||
· |
raise
additional capital through the sale and issuance of common shares.
The
Company closed a private offering of common stock on February 2,
2006 for
762,500 shares of common stock and warrants to acquire 381,250
shares of
common stock, for proceeds of $610,000;
and
|
· |
build
a portfolio of production, development, step-out and more speculative
exploration opportunities using additional capital raised and cash
provided by future operating activities.
|
Computer
equipment
|
30%
|
Furniture
and Fixtures
|
30%
|
Automobiles
|
30%
|
· |
abnormal
amounts of idle facility expense, freight, handling costs and wasted
material (spoilage) should be recognized as current-period charges;
and
|
· |
the
allocation of fixed production overhead to inventory based on the
normal
capacity of the production facilities is
required.
|
2005
|
||||||||||
Cost
$
|
Accumulated
Depletion
and Depreciation
$
|
Net
Book Value
$
|
||||||||
Oil
and natural gas properties
|
8,331,767
|
(444,853
|
)
|
7,886,914
|
||||||
Materials
and supplies
|
300,177
|
-
|
300,177
|
|||||||
Furniture
and Fixtures
|
20,167
|
(4,805
|
)
|
15,362
|
||||||
Computer
equipment
|
73,682
|
(2,649
|
)
|
71,033
|
||||||
Automobiles
|
49,534
|
(9,812
|
)
|
39,722
|
||||||
8,775,327
|
(462,119
|
)
|
8,313,208
|
Number
of Shares
|
Amount
$
|
||||||
Balance,
beginning of period
|
-
|
-
|
|||||
Common
shares issued, at par value of $0.001 per share
|
43,285,112
|
43,285
|
|||||
Balance,
end of period
|
43,285,112
|
43,285
|
Dividend
yield ($ per share)
|
0.00
|
|
Volatility
(%)
|
57.0
|
|
Risk-free
interest rate (%)
|
2.33
|
|
Expected
life (years)
|
3.0
|
Number
of Options
|
Weighted
Average Exercise Price ($/option)
|
||||||
Outstanding,
beginning of period
|
-
|
-
|
|||||
Granted
|
1,940,000
|
1.12
|
|||||
Balance,
end of period
|
1,940,000
|
1.12
|
Exercise
Price ($/option)
|
Number
of Options Outstanding
|
Weighted
Average Expiry (years)
|
|
$0.80
|
1,600,000
|
9.9
|
|
$2.62
|
340,000
|
10.0
|
|
Total
Options
|
1,940,000
|
9.9
|
Dividend
yield ($ per share)
|
0.00
|
|||
Volatility
(%)
|
57.0
|
|||
Risk-free
interest rate (%)
|
2.33
|
|||
Expected
life (years)
|
3.0
|
|||
Forfeiture
percentage (% per year)
|
10.0
|
2005
|
||||
$
|
||||
Balance
beginning of period
|
-
|
|||
Obligations
assumed with property acquisitions
|
66,931
|
|||
Expenditures
made on asset retirements
|
-
|
|||
Accretion
|
801
|
|||
Revisions
to estimates
|
-
|
|||
Balance,
end of period
|
67,732
|
2005
|
||||
$
|
||||
Loss
before income taxes
|
(2,248,908
|
)
|
||
Statutory
income tax rate
|
34
|
%
|
||
Income
tax benefit
|
(764,628
|
)
|
||
Stock-based
compensation
|
17,990
|
|||
Valuation
allowance
|
717,410
|
|||
Deferred
income tax recovery and deferred tax asset
|
(29,228
|
)
|
2005
|
||||
$
|
||||
Increase
in accounts receivable
|
(808,960
|
)
|
||
Increase
in prepaid expenses
|
(42,701
|
)
|
||
Increase
in inventory
|
(447,012
|
)
|
||
Increase
in accounts payable
|
1,142,930
|
|||
Increase
in accrued liabilities
|
121,122
|
|||
(34,621
|
)
|
$
|
||||
2006
|
7,578
|
|||
Total
minimum lease payments
|
7,578
|
$
|
||||
2006
|
88,240
|
|||
2007
|
105,888
|
|||
2008
|
85,888
|
|||
2009
|
81,888
|
|||
2010
|
81,888
|
|||
2011
|
6,824
|
|||
Total
minimum lease payments
|
450,616
|
Oil
|
Gas
|
||||||
(barrels)
|
(thousand
cubic feet) |
||||||
Proved
developed and undeveloped reserves, beginning of period
|
-
|
-
|
|||||
Revisions
of previous estimates
|
-
|
-
|
|||||
Improved
recovery
|
-
|
-
|
|||||
Purchase
of reserves in place
|
618,703
|
84,693
|
|||||
Extensions
and discoveries
|
-
|
-
|
|||||
Production
|
(36,011
|
)
|
(60,229
|
)
|
|||
Sales
of reserves in place
|
-
|
-
|
|||||
Proved
developed and undeveloped reserves, end of period
|
582,692
|
24,464
|
|||||
Proved
developed reserves, end of period
|
463,892
|
24,464
|
$
|
||||
Unproved
oil and gas properties
|
12,588
|
|||
Proved
oil and gas properties
|
8,319,179
|
|||
8,331,767
|
||||
Accumulated
depletion, depreciation and amortization
|
(444,853
|
)
|
||
Capitalized
costs
|
7,886,914
|
|||
$
|
||||
Property
acquisition costs
|
||||
Proved
|
7,087,858
|
|||
Unproved
|
12,588
|
|||
Exploration
costs
|
-
|
|||
Development
costs
|
1,231,321
|
|||
Loans Incurred |
8,331,767
|
|||
$
|
||||
Net
sales
|
1,059,297
|
|||
Production
costs
|
395,287
|
|||
Depletion,
depreciation and accretion
|
444,853
|
|||
219,157
|
||||
Income
taxes
|
76,705
|
|||
Results
of operations for producing activities
|
142,452
|
· |
no
economic value is attributed to probable and possible
reserves;
|
· |
use
of a 10% discount rate is arbitrary;
and
|
· |
prices
change constantly from year-end
levels.
|
$
|
||||
Future
cash inflows
|
25,445,000
|
|||
Future
production and development costs
|
(11,965,000
|
)
|
||
Future
income taxes
|
(1,575,000
|
)
|
||
Future
net cash flows
|
11,905,000
|
|||
10%
discount factor
|
(2,725,000
|
)
|
||
Standardized
measure
|
9,180,000
|
|||
· |
the
Company’s audited consolidated financial statements for the period from
incorporation on January 26, 2005 to December 31, 2005;
and
|
· |
audited
schedule of revenues, royalties and operating costs of the Palmar
Largo
Property for the eight months ended August 31,
2005.
|
GRAN
TIERRA ENERGY, INC.
Pro
forma Consolidated Statement of Operations
Year
Ended December 31, 2005
(Unaudited)
(thousands
of US dollars, except for per share
amounts)
|
Gran
Tierra Energy
|
Palmar
Largo
Property
|
Pro
forma
Adjustments
|
Note
|
Pro
forma
Consolidated
|
||||||||||||
REVENUE
|
1,059
|
2,560
|
-
|
3,619
|
||||||||||||
EXPENSES
|
||||||||||||||||
Operating
|
395
|
1,081
|
-
|
1,476
|
||||||||||||
General
and administrative
|
2,482
|
-
|
-
|
2,482
|
||||||||||||
Depletion,
depreciation and accretion
|
462
|
-
|
704
|
2a
|
1,166
|
|||||||||||
Foreign
exchange gain
|
(31
|
)
|
-
|
-
|
(31
|
)
|
||||||||||
3,308
|
1,081
|
704
|
5,093
|
|||||||||||||
Earnings
(loss) before income taxes
|
(2,249
|
)
|
1,479
|
(704
|
)
|
(1,474
|
)
|
|||||||||
Provision
for income taxes
|
(29
|
)
|
-
|
-
|
2b
|
(29
|
)
|
|||||||||
NET
EARNINGS (LOSS) FOR
THE PERIOD
|
(2,220
|
)
|
1,479
|
(704
|
)
|
(1,445
|
)
|
|||||||||
Basic
and Diluted Loss Per Share
|
(0.16
|
)
|
-
|
-
|
3
|
(0.03
|
)
|
a. |
Depreciation,
depletion and accretion (“DD&A”) expense has been adjusted to reflect
the additional depletion on the Palmar Largo Property and the
accretion of
asset retirement obligations
acquired.
|
b. |
The
provision for income taxes has been adjusted to account for the
tax
effects of operating income from the Palmar Largo Property and
DD&A.
|
Eight-month
period ended
|
||||
August
31, 2005
|
||||
Revenues
|
2,913,532
|
|||
Royalties
|
(353,228
|
)
|
||
Operating
costs
|
(1,081,085
|
)
|
||
1,479,219
|
Revenues
from the sale of product are recognized upon delivery to
purchasers.
|
A
12% royalty is payable on the estimated value at the wellhead
of crude oil
production and the natural gas volumes commercialized. The
estimated value
is calculated based upon the actual sale price of the crude
oil and gas
produced, less the costs of transportation and storage.
|
In
preparing the Schedule of Revenues, Royalties and Operating
Cost, the
results have been translated from Argentine pesos to U.S.
dollars using
the average exchange rate for the eight-month period ended
August 31,
2005. The average exchange rates from Argentine pesos to
U.S. dollars was
Argentine peso 2.9015 to U.S. dollar for the eight-month
period ended
August 31, 2005.
|
(Amounts
expressed in U.S. Dollars - Note
2)
|
Six-month
period ended
|
Year
ended
|
||||||||||||
June
30, 2005
|
June
30, 2004
|
2004
|
2003
|
||||||||||
(unaudited)
|
(unaudited)
|
||||||||||||
Revenues
|
2,065,587
|
2,036,454
|
4,703,136
|
4,422,688
|
|||||||||
Royalties
|
(258,716
|
)
|
(239,111
|
)
|
(492,535
|
)
|
(457,293
|
)
|
|||||
Operating
costs
|
(837,524
|
)
|
(635,088
|
)
|
(1,424,152
|
)
|
(1,297,260
|
)
|
|||||
969,347
|
1,162,255
|
2,786,449
|
2,668,135
|
Name
|
Age
|
Position
|
Dana
Coffield
|
47
|
President
and Chief Executive Officer
Director
|
James
Hart
|
51
|
Vice
President, Finance and Chief Financial Officer
Director
|
Max
Wei
|
55
|
Vice
President, Operations
|
Rafael
Orunesu
|
49
|
Vice
President, Latin America
|
Jeffrey
Scott
|
43
|
Chairman
of the Board of Directors
|
Walter
Dawson
|
65
|
Director
|
Verne
Johnson
|
61
|
Director
|
Nadine
C. Smith
|
48
|
Director
|
Annual
Compensation
|
Long-Term
Compensation Awards
|
|||
Named
Executive Officer & Principal Position
|
Year
|
Salary
($)
(1)
|
Other
Annual Compensation ($)(2)
|
Securities
Underlying Options/SARs (#)(3)
|
Dana
Coffield
President
and Chief Executive Officer
|
2005
|
154,386
|
-
|
162,500
|
James
Hart
Vice
President, Finance and Chief Financial Officer
|
2005
|
154,386
|
-
|
162,500
|
Max
Wei
Vice
President, Operations
|
2005
|
154,386
|
-
|
162,500
|
Rafael
Orunesu
Vice
President, Latin America
|
2005
|
150,000
|
55,200
|
162,500
|
(1)
|
Dana
Coffield, James Hart and Max Wei’s salaries are paid in Canadian dollars:
CDN$
180,000 per year.
|
(2)
|
Cost
of living allowance.
|
(3)
|
Granted
under terms of our Equity Incentive
Plan.
|
Name
|
Number
of Securities Underlying Options/SARs Granted (#)
|
Percent
of Total Options/SARs Granted to Employees In Fiscal
Year
|
Exercise
or Base Price ($/Sh) (1)
|
Expiration
Date
|
||||
Dana
Coffield
|
162,500
|
8.38%
|
$0.80
|
November
10, 2015
|
||||
James
Hart
|
162,500
|
8.38%
|
$0.80
|
November
10, 2015
|
||||
Max
Wei
|
162,500
|
8.38%
|
$0.80
|
November
10, 2015
|
||||
Rafael
Orunesu
|
162,500
|
8.38%
|
$0.80
|
November
10, 2015
|
Name
|
Shares
Acquired On Exercise(#)
|
Value
Realized ($)
|
Number
of Unexercised Securities Underlying Options / SARs At FY-End (#)
Exercisable / Unexercisable
|
Value
of Unexercised In-The-Money Option/SARs At FY-End ($) Exercisable
/
Unexercisable (1)
|
||||
Dana
Coffield
|
0
|
0
|
0/162,500
|
$0/$318,500
|
||||
James
Hart
|
0
|
0
|
0/162,500
|
$0/$318,500
|
||||
Max
Wei
|
0
|
0
|
0/162,500
|
$0/$318,500
|
||||
Rafael
Orunesu
|
0
|
0
|
0/162,500
|
$0/$318,500
|
(1)
|
The
value of options is based on a year-end closing price of $2.76
per
share.
|
Shares
Beneficially Owned
|
|||||||
Name
and Address of Beneficial Owner
|
Number
of Shares Beneficially Owned
(1)
|
Percentage
of
Common Stock Outstanding
|
|||||
Dana
Coffield (2)
|
1,734,661
|
3.89
|
%
|
||||
James
Hart (3)
|
1,689,683
|
3.79
|
%
|
||||
Max
Wei (3)
|
1,689,683
|
3.79
|
%
|
||||
Rafael
Orunesu (3)
|
1,689,683
|
3.79
|
%
|
||||
Jeffrey
Scott (4)
|
2,363,861
|
5.28
|
%
|
||||
Walter
Dawson (5)
|
2,672,619
|
5.96
|
%
|
||||
Verne
Johnson (6)
|
1,479,542
|
3.32
|
%
|
||||
Nadine
C. Smith (7)
|
1,915,761
|
4.27
|
%
|
||||
Bank
Sal. Oppenheim jr. & Cie. (Switzerland) Ltd. (8)
|
3,187,500
|
6.99
|
%
|
||||
Directors
and executive officers as a group (total of 8 persons)
|
15,235,493
|
33.53
|
%
|
(1)
|
Beneficial
ownership is calculated based on 44,547,612 shares of common stock
issued
and outstanding as of March 7, 2006, which number includes shares
of
common stock issuable upon the exchange of the exchangeable shares
of
Goldstrike Exchange Co. issued to certain former holders of Gran
Tierra
Canada’s common stock. Beneficial ownership is determined in accordance
with Rule 13d-3 of the SEC. The number of shares beneficially owned
by a
person includes shares of common stock underlying options or warrants
held
by that person that are currently exercisable or exercisable within
60
days of March 7, 2006. The shares issuable pursuant to the exercise
of
those options or warrants are deemed outstanding for computing the
percentage ownership of the person holding those options and warrants
but
are not deemed outstanding for the purposes of computing the percentage
ownership of any other person. Unless otherwise indicated, the persons
and
entities named in the table have sole voting and sole investment
power
with respect to the shares set forth opposite that person’s name, subject
to community property laws, where applicable.
|
(2)
|
The
number of shares beneficially owned includes 14,993 shares issuable
upon
the exercise of warrants exercisable within 60 days of March 7, 2006.
The
number of shares beneficially owned includes 1,689,683 exchangeable
shares.
|
(3)
|
All
shares beneficially owned by such stockholder are exchangeable shares.
|
(4)
|
The
number of shares beneficially owned includes 224,991 shares issuable
upon
the exercise of warrants exercisable within 60 days of March 7, 2006.
The
number of shares beneficially owned includes 1,688,889 exchangeable
shares.
|
(5)
|
The
number of shares beneficially owned includes 275,000 shares issuable
upon
the exercise of warrants exercisable within 60 days of March 7, 2006,
of which 175,000 of such warrants are held by Perfco Investments
Ltd. The
number of shares beneficially owned includes 350,000 shares of common
stock held by Perfco Investments Ltd. and 158,730 shares of common
stock
held by Mr. Dawson’s spouse. The number of shares beneficially owned
includes 1,688,889 exchangeable
shares, of which 1,587,302 are
held by Perfco Investments Ltd., of which Mr. Dawson is the sole
owner.
Mr. Dawson has sole voting and investment power over the shares held
by
Perfco and disclaims beneficial ownership of such
shares.
|
(6)
|
The
number of shares beneficially owned includes 62,493 shares issuable
upon
the exercise of warrants exercisable within 60 days of March 7, 2006.
The
number of shares beneficially owned includes 1,292,064 exchangeable
shares, of which 396,825 are held by KristErin Resources Ltd., a
private
family owned business of which Mr. Johnson is the president. Mr.
Johnson
has sole voting and investment power over the shares held by KristErin
Resources Ltd.
|
(7)
|
The
number of shares beneficially owned includes 312,500 shares issuable
upon
the exercise of warrants exercisable within 60 days of March 7, 2006.
The
number of shares beneficially owned also includes 978,261 shares
of
Goldstrike, Inc., the former public reporting
entity.
|
(8)
|
The
number of shares beneficially owned includes 1,062,500 shares issuable
on
upon the exercise of warrants exercisable within 60 days of March
7, 2006.
The address for Bank Sal. Oppenheim jr. & Cie. (Switzerland) Ltd. is
Uraniastrasse 28, CH-8022 Zurich, Switzerland. This information is
based
solely upon our records from the private
offerings.
|
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
|
Weighted-average
exercise price of outstanding options, warrants and
rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
(a)
|
(b)
|
(c)
|
|
Equity
compensation plans approved by security holders
|
1,940,000
|
$1.12
|
60,000
|
Equity
compensation plans not approved by security
holders
|
--
|
--
|
--
|
Total
|
1,940,000
|
--
|
60,000
|